Gold prices could swing both ways, depending on whether Britain votes to leave or remain with the European Union (EU). With fears of Britain's exit (Brexit) receding in the past few days, gold prices have fallen and stock markets have rallied. However, should Brexit happen, gold prices could hit as high as $1,400 per ounce from Tuesday's $1,283, according to an analyst.
"While it (Brexit) may also support the dollar thereby creating some headwind giving the negative correlation we see an increased risk that gold could be propelled towards $1400, the 2014 high," the Khaleej Times quoted Ole Hansen, head of Commodity Strategy at Saxo Bank, as saying.
Gold prices had hit a high of $1,900 an ounce almost five years ago when investors used it to hedge the yellow metal against inflation. "Gold is considered a good hedge against inflation. But the increase in gold price has far outpaced inflation, especially during the last decade," Lloyd Thomas, professor of economics at Kansas State University, had told CNN Money in August 2011.
A vote to stay with the bloc would have the opposite effect on the safe haven metal.
"A 'remain' result would initially trigger a major relief rally across global stocks but with the dollar also likely to weaken and with global bond yields remaining compressed we see the downside risk limited to around $1250/oz," he said.
On the other hand, Brexit would push stocks and bonds down, according to Hansen.
On Tuesday, gold prices fell from the day's high of $1,294 an ounce to $1,283.50, reported Reuters.
Gold prices have remained range-bound in India over the past two months. After closing at Rs. 28,850 per 10 gm on May 30 from a high of Rs. 30,200 at the beginning of the month, the yellow metal closed at Rs. 29,650 after breaching the Rs. 30,000-mark on June 16.
Based on Jan. 1 closing price of Rs. 25,510 per 10 gm and Monday's (June 20) closing of Rs. 29,650, gold prices have gone up by 16.2 percent.
In the international market, gold prices have rallied about 24 percent since the beginning of calendar 2016.
